New twists in labor issues on the horizon

A new labor-related proposal has emerged that could add a new twist to discussions about federal labor policy. The Center for American Progress (CAP) has proposed that federal contract awards be based in part on compliance with labor-related statutes and the degree to which a company pays fair, reasonable wages and benefits.

The first element of the proposal will be addressed through contractor responsibility determinations, which, in the future, are to include information about corporate adherence to all laws from the new Federal Awardee Performance and Integrity Information System. However, serious concerns persist about how to establish a balanced, transparent and objective decision matrix for contracting officers to use when they evaluate the massive and varied information that will be in the database. That is a mammoth challenge that has yet to be adequately addressed, but such standards are essential if the concept is to work as intended.

The second portion of the center’s proposal is equally challenging. CAP cites a number of cases to illustrate its concern that some employees on government contracts are not paid fairly or are denied basic health benefits. Unfortunately, in making its case, CAP does not distinguish the differing nature and dynamics associated with its examples. Some involve purely commercial companies that sell commodities such as food and apparel to the government and which, from the government procurement perspective, are intentionally minimally regulated. Whether the government can or should regulate those industries is a huge question.

However, other examples involve contracts that are regulated under the Service Contract Act, and CAP sayid the companies in those examples are complying with the SCA. That is a critical distinction, because under the SCA, it is the government — not the company — that dictates the prevailing wages and benefits that must be paid. And the premise of the SCA is that these prevailing wages are, in fact, fair wages. In addition, measuring SCA violations is highly problematic because the complexity of the act leads to inadvertent mistakes that, in the end, are counted as violations of the law. To the extent that wages might be deemed inadequate or the SCA does not function as intended, the logical redress would be to focus on the Labor Department’s management and enforcement of the law and the wage determinations process it requires.

Further, although CAP makes what might be an appealing recommendation that companies be given a bidding advantage for offering wages above and beyond SCA rates, it is unrealistic and implausible because the vast majority of these contracts are awarded on a sealed bid, or low price/technically acceptable, basis. Clearly, the government should not support the unfair treatment of workers. But a one-size-fits-all solution rarely works, especially in federal procurement and when the solution fails to distinguish between different market segments and their different dynamics. In addition, CAP’s report explicitly states that one effect of the proposal could be the reduced reliance on federal contractors, thus raising the question of whether there is a broader agenda at work.

It is also possible that CAP is seeking to open a federal debate over the living wage. In any case, the discussion can be an important and valuable one if it fully addresses the varied complexities and realities of the proposal, in addition to its real goals. And we must recognize that implementation is far more complex and nuanced than it might appear. Because this issue will not go away, now is the time to inject those elements into the discussion. A real discussion about the real issues and workable solutions can then begin.

About the Author

Stan Soloway is a former deputy undersecretary of Defense and former president and chief executive officer of the Professional Services Council. He is now the CEO of Celero Strategies.

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